The former coal plant was due to close this year due to the EU's Large Combustion Plant Directive (LCPD), which mandates polluting facilities to shut after 20,000 hours of operation or by the end of 2015.

RWE npower began work to convert the plant to biomass in 2011, in a move designed to develop what would have been the largest biomass power station in the world.

It said the 750MW plant was a "success both commercially and technically" and, with the plant still set to close in 2013, it attempted to use its remaining operational hours to develop a dedicated biomass power station that would extend the plant's life.

But a spokeswoman said RWE's company-wide cost reduction programme had impacted the level of capital available for the project, while lack of policy clarity meant making an investment decision at this point was impossible.

"We don't yet know the finer details of the Energy Bill," she said. "Until we get those finer details we can't make a decision."

The plant will now close on 31 October and unless the the company decides to recommence work on the conversion project it will then be decommissioned.

However, RWE npower is still going ahead with the planning process and the company has not ruled out reviving the project in the future or even selling the plant, the spokeswoman said.

In the statement, Roger Miesen, chief technical officer at RWE Generation, added: "This decision has not been taken lightly. Tilbury remains a good site for future power generation. RWE still believes that biomass has a role to play in future power generation and will continue to progress options at strategic sites."

A Department of Energy and Climate Change (DECC) spokesman declined to comment directly on work halting at Tilbury, saying only that it was a commercial decision for the company to take.

However, he said the government is supportive of coal to biomass conversions as a cost-effective way to cut emissions.

"We brought a lot of detail forward last week on the level of support through the Energy Bill," he said. "But some details are still to come." This includes the electricity market reform delivery plant, which is expected before Parliament rises for summer recess on June 18.

However, a spokesperson for the Renewable Energy Association said it was "very disappointing that the world's largest 100 per cent biomass power station is going to close, particularly as npower themselves described it as "a success both commercially and technically"".

"Biomass is a key technology for bridging the looming capacity gap with flexible, quick-to-build, low carbon plant, and has a valuable role to play balancing out intermittent generation from other renewables," they added.